Opinion: Lowering insurance costs in Michigan

Michigan residents are paying $8.79 billion dollars more in auto insurance each year than the rest of America. The current no-fault debate lacks hard numbers and relies too much on finger pointing. We just want lower rates.

Firefighters, police, tow truck employees and drivers help to clear cars that crashed into one another in a multiple-car accident that occurred on northbound U.S. 31 in Muskegon.(Photo: JIMMIE PRESLEY)

Zebra Analytics analyzed 61 million real insurance rates across the US and found we pay $2,610 per year vs the $1,427 US average. We each pay an extra $1,183 per year because Michigan mandates that everyone purchase unlimited Personal Injury Protection (i.e. no-fault) in their policy.

If you’re not convinced no-fault is the reason why our rates are so high, just look at the average cost of a personal injury clam in Michigan — $75,600.

Compare that to the second highest state in the nation, New Jersey — $13,630. We pay five times more.

This is because we have an insurance ecosystem that is ripe for fraud and overcharges. Health care providers can charge auto insurers five times as much for regular services and bill them at the “master rate” because it is reasonable to do so according to the current law.

Both sides agree that there should be a maximum amount charged for certain services and agree that there should be a fee schedule. This fee schedule could save us $1.3 billion dollars a year. After balancing the budget in May, Lansing should move onto passing legislation regarding a fee schedule.

After Colorado abolished no-fault in 2003, tax paying drivers saved $616 million each year. If we translate this to Michigan, we could easily save $1.095 billion dollars per year. Giving Michigan residents the option to choose whether to buy no-fault will save us all billions of dollars.

Some personal injury lawyers solicit fake claims by trolling police databases and pay cash to non-injured people to seek out treatment at a partner health facility. They plan on the insurance company to not pay the claim so they can take them to court or settle. The lawyers usually get paid a third of court settlements.

To prevent this abuse, a specific auto insurance fraud division should be created at the Department of Insurance and Financial Services. To root out existing corruption, a cash reward should be given to people who tip off or provide admissible evidence of fraud.

This mundane insurance issue is costing us too much to ignore. We should use that $8.79 billion dollars to build better roads, schools, fix the Flint water crisis, or save for our children’s college.

Jonathan Sheets is a commercial agent at Lyman & Sheets and a state licensed Insurance Instructor.